When is consolidating a 'good' idea?

ferry

I understand the general feeling on the board advises against consolidation but wondering when or if consolidation ever is a good idea?
In my case foe example I'm only managing minmum payments on my CC's but they're on 0% at the moment.

When the deal ends in a few months is this a good call to look for an unsecured loan where the actual amount outstanding will be coming down?

Cheers for any advice

[Deleted User]

If you're only making min payments on 0% you have a major problem. You need to attack the debts now while you're not incurring interest. If you wait until the deal ends then you will undoubtedly drown.

Suggest you post up some figures of debt and income etc and also pay a visit to the DFW boards ASAP.

27col

If you are unable to pay more than the minimum payments when on a 0% card, then how do you propose to pay the instalments on a loan that is not interest free.

AMILLIONDOLLARS

If I were you, I would not wait until the 0% come to an end.

Chances are that you will now find it very difficult to get a loan to cover your outstanding amounts as this new loan will be seen as additional borrowing. Now is a good time to consider snowballing, where you concentrate everything you have spare on the highest APR debt, pay that off first, then concentrate on the next then the next until you have paid off everything, it's a long haul solution but at least you have not deferred the debt further into the future, which you would do with consolidation. Go over to the debt free wannabe board and post a Statement of Affairs, the guys over there are really good at helping people in a similar situation to yourself.

Good luck

AMD

CLAPTON

the debts will reduce faster if you pay more each month and reduce the interest rate

consolidation may or may not mean you pay more each month and may or may not mean you pay less interest

if however you consolidate CCs debt into loan debt and then continue to send on the CCs your debt is likely to increase

rdwarr

It's good if you can (or are forced to) stick with the original plan. I did one about 20 years back where my bank lent me the money but cancelled my Barclaycard and overdraft. Three years later the debt had gone.

DCFC79

Its only a good idea if A you don't going to stretch yourself with the repayments, B you tell the truth with the application eg dont exaggerate your salary just to get the loan and C you dont end up having a splurge on stuff as you think you have "loads of money" and you wake up the next morning thinking " *** have I done ".

fozmcfc

You would be better off, trying for another 0% Balance Transfer card and transfer it. Ok you will have to pay a balance transfer fee, but it may give you more room to breathe.

Of course even at 0% lifestyle changes should still be made to pay off as much as possible before the 0% runs out.

However, there are a couple of times when paying the minimum is fine on a 0% card.

1/ When you have other debt that is charging interest, you should definately only pay the minimum to the 0% card and any extra to the other debt.

2/ When you are putting money into a savings account and earning more, than the balance transfer fee. At the end, you pay off the 0% card off with money saved and hopefully still have a bit of money left in the savings account (I think we can assume here, this is definately not an option).

If you are turned down for a 0% balance transfer card, then a loan maybe more suitable if the APR is less than the credit cards APR.

Even then make sure the card is never used again and no other debt is run up while the loan is being paid off.

Many of us, have got a loan to pay off a credit card, then run the credit card up again and ended up with the loan and credit card payments to pay.

jason1231972

I think it's pretty obvious that consolidation is a good idea when...

a) you can genuinely afford it (i.e. you can afford to pay your existing debts, and could afford to repay any plan into which they're consolidated. Consolidation would be a bad idea if existing debts were already seriously unaffordable, as consolidation wouldn't get you anywhere, either!)

b) you can avoid the temptation of running the CCs, etc., back into debt.

c) any consolidation plan is genuinely cheaper than your existing arrangements. Someone else points out the positive effects of overpaying credit cards above - assuming decent levels of overpayment, the effect of this method on reducing your CC balances should not be underestimated. APRs should not be considered in isolation, rather it's best to run a few calculators (lots available) that allow you to work out the fastest and cheapest way of clearing multiple debts.

d) the 'psychological' effect of consolidation can be beneficial, in that the old chestnut "one affordable monthly payment" applies. However, this effect only lasts if further debt is not taken on

chesky369

Consolidation only gives you a brief illusion of being debt-free. It does nothing to cure the fact that you are basically living beyond your means and until that is addressed, you are in a downward spiral.